On November 9th, Petrofac announced that it had acquired a 45% share in a 50
BCF gas field offshore Tunisia. This transaction values developed North African gas
at $2.20 per mcf. Plugging this value into our model for Petroceltic returns a riskweighted
value of 42p per share for the company's entire portfolio. This implies
potential upside of a whopping 185% on today’s share price. Petroceltic’s North
African gas assets are dominated by its interest in the Isarene licence in Algeria.
The value in the Petrofac deal in part relates to the price at which gas will be sold.
The transaction allows for gas to be sold at a price linked to “FOB Med fuel oil
prices” which, according to our analysis, averaged $37 per barrel or $6.2 per mcf in
the past 12 months. This is comparable to international gas prices.
If Petroceltic is able to market its share of Algerian gas along similar lines, this
should be more accurately reflected in its valuation and the stock should be rerated.
It is interesting to note that this week First Calgary agreed with Sonatrach,
the Algerian state oil company, that it would market gas from its Algerian licence at
prices linked to European fuel prices.
Petroceltic is currently drilling its second well on the Isarene licence in Algeria.
Drilling operations are expected to be completed in November.
Price: 15p Target: 26p Issued: 13/10/06
Previous :27p Issued: 31/08/06
(Starting Points November 13th 2006)
Analyst: Caren Crowley: caren.crowley@davy.ie
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